(Bloomberg) -- Severn Trent Plc has mandated banks for new bonds which will give an indication of investors’ appetite for UK water companies debt as Thames Water, the sector’s largest, teeters on the brink of junk.
The utility is holding fixed income investor calls alongside an update to equity holders for a possible benchmark-sized sterling-denominated 14 year sustainability bond beginning on Tuesday, according to a person familiar with the matter who asked not to be identified.
It will be the first company to return to the debt market since the UK water regulator Ofwat this month proposed a spending package of £88 billion ($113.8 billion) by water companies to clean up the country’s rivers and seas and make essential upgrades to infrastructure.
While Ofwat categorized Severn’s investment plans as “outstanding,” it chose to impose a turnaround oversight regime on Thames Water. Now Thames’s rating faces a cut by S&P Global Ratings, which could threaten the investment-grade status of over £10 billion worth of bonds issued by the UK’s largest water utility.
All bond sold by UK water companies so for this year are quoted wider than launch spread, according to data compiled and analyzed by Bloomberg.
Severn Trent’s new bond offering will be managed by BofA Securities, CIBC Capital Markets, Lloyds and RBC Capital Markets. It is expected to be rated Baa1 by Moody’s, BBB+ by S&P, and A- by Fitch and may follow the investor calls, subject to market conditions.
More: UK Water Watchdog Now Probing All Utilities on Sewage Spills
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